Lennox International Inc (LII) · Oct 28, 2026 · Earnings
Miss — Adjusted EPS $6.84 vs ~$7.36 consensus
Lennox earnings matched revenue expectations, but adjusted EPS missed as residential margins fell sharply under pricing, inflation and tariff pressure.
Lennox is trying to offset a weak residential HVAC market with faster-growing commercial climate, refrigeration, services and acquisitions; its latest prior outlook called for 2026 adjusted EPS of $23.00-$24.00.
Revenue landed essentially in line, but earnings missed badly. Third-quarter sales rose 10% to $1.57 billion, roughly matching the published consensus of about $1.57 billion, while adjusted diluted EPS was $6.84 versus consensus near $7.36. The miss is not an accounting technicality: management explicitly said margins and results fell short of its expectations.
| Metric | Q3 2026 | Q3 2025 | Market comparison |
|---|---|---|---|
| Revenue | $1,572.5M | $1,426.8M | ~$1.57B consensus |
| Adjusted diluted EPS | $6.84 | $7.38 | ~$7.36 consensus |
| GAAP diluted EPS | $6.41 | $7.38 | — |
| Total segment profit | $323.3M | $328.8M | — |
| Total segment margin | 20.6% | 23.0% | — |
| Home Comfort Solutions revenue | $937.2M | $912.9M | — |
| Home Comfort Solutions profit | $175.7M | $215.3M | — |
| Building Climate Solutions revenue | $635.3M | $513.9M | — |
| Building Climate Solutions profit | $166.5M | $140.3M | — |
The core problem is profitability, not demand alone. Home Comfort revenue grew just 3%, but segment profit dropped 18% and margin contracted 490 basis points to 18.7%. The company cites competitive pricing, product-cost inflation, tariffs, lower factory absorption and higher operating costs; price and mix benefits were not enough to offset them.
Building Climate is carrying the growth story, but not yet the whole earnings story. Revenue in the commercial-oriented segment rose 24%, including 15% organic growth, and profit increased 19%; however, its margin still slipped 110 basis points to 26.2%. That makes the portfolio mix better, but the fast-growing segment did not fully absorb the residential margin collapse.
Cash generation improved, but it does not erase the operating miss. Quarterly operating cash flow rose to $395 million from $301 million, helped by lower inventories, and free cash flow reached $362.7 million versus $265.3 million a year earlier. That is a genuine offset, but the business still spent $151 million on share repurchases while facing higher debt and acquisition-related costs.
Bottom line: Lennox is growing sales through Building Climate and acquisitions, but the quarter shows that residential competition and cost inflation are overwhelming that growth at the profit line. Versus expectations, this is an earnings miss with the central margin-recovery thesis still unproven.
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